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Dirty Money: US Banks At the Bottom of the Class

From the cradle to the grave, coal is a risky business. Each stage in the life cycle of coal–extraction, transportation and combustion–presents increasing health, environmental, reputational, legislative and financial risks. Burning coal to make electricity is the largest source of carbon pollution in the United States, and the U.S. is the 2nd largest coal producer in the world. Coal-fired energy generation is responsible for pollutants that damage cardiovascular and respiratory health and threaten healthy child development. To protect our climate and public health, the country must decrease its reliance on coal while building demand for a clean energy economy. Coal mining, burning, and storage all carry significant risks to public health and to the climate. No bank or power utility should invest even one more dollar in coal.

Coal not only represents serious social and environmental risks, but it also poses a financial risk for those who invest in it. The fluctuations in domestic coal markets mark an uncertainty for coal’s future role as a cheap or reliable fuel source. In addition, there is unprecedented regulatory uncertainty in the areas of coal mining and coal-fired power production, and significant litigation challenges for proposed coal export terminals. As shown in this report, in recent years several investors have made the wrong bet on coal and lost big sums of money in the process.

KEY FINDINGS

This is the third annual coal finance report card conducted
by Rainforest Action Network (RAN), the Sierra Club and
BankTrack. In the last two years, the report reviewed the top
banks exposed to mountaintop removal coal mining, and
analyzed their policies in dealing with the controversial practice.
This year, exposure to and policies focused on coal-fired power
plants (CFPP) have been added to the report card.
In the last three years, RAN, the Sierra Club and BankTrack
have found that an increasing number of U.S. and European
banks are waking up to the environmental, social, regulatory and
reputational risks that arise when doing business with the coal
industry. In order to address these risks, banks have developed
an assortment of enhanced diligence processes around such
transactions and in some cases have set limits as to the amount of
exposure they are prepared to accept.

The Coal Finance Report Card 2012 sets out to identify the
exposure of banks to some of the most controversial coal mining
companies and to the riskiest coal-burning utility companies
in the U.S. The report card focuses on two specific aspects of
the coal industry that have come under increased regulatory
scrutiny in recent years as a result of public pressure and
litigation: mountaintop removal coal mining and coal-fired power
generation. In addition, it assesses the range of approaches taken
by the banking sector to address the risks associated with these
practices.

The banks examined in this report are the largest six U.S. banks,
based on total assets as of March 31, 2011, JPMorgan Chase,
Bank of America, Citi, Wells Fargo, Goldman Sachs and Morgan
Stanley, as well as two banks with a significant history of exposure
to the coal industry, PNC and GE Capital.

Banks own a surprising number of coal-fired power plants.
Whether it is Citi (Powerton and Joliet), Bank of America
(Boardman), Goldman Sachs (Cogentrix), or General Electric
(Homer City) their relationship to and control over these dirty
dinosaurs is something they don’t publicize or easily admit to.

These findings are based on Bloomberg data of each bank’s
number of transactions with mountaintop removal and coal-burning
utility companies from 2010 to 2012.

In addition, this report has graded each bank on its mountaintop
removal (MTR) and coal-fired power plant (CFPP) policies with
an A-F criterion. Since each bank treats its mountaintop removal
coal mining investments and policies differently from its coalfired
power plant investments, banks are given multiple grades to
accurately reflect their roles in different parts of the coal sector.

Learn More

As outrage at the country’s largest banks increases with the Occupy Movement and record bank customers move money to credit unions and local banks, RAN finds yet another reason customers should be wary of BoA. Our campaign briefing shines a light on the company as the country’s top financier of the coal industry, in turn, a leading contributor to climate change in the United States.